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Here's Why Best Buy (BBY) Trims Comparable Sales Forecast
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A challenging operating environment and softness in consumer demand are making things tough for Best Buy Co., Inc. (BBY - Free Report) . Higher gasoline and food prices are squeezing disposable income, and consumers are compelled to curtail spending on discretionary items such as electronics. Despite undertaking concerted efforts to tide over the unwarranted situation, these factors persuaded management to trim comparable sales and operating margin rate forecast.
Corie Barry, Best Buy CEO, said, “As high inflation has continued and consumer sentiment has deteriorated, customer demand within the consumer electronics industry has softened even further, leading to Q2 financial results below the expectations we shared in May.”
Best Buy now envisions second-quarter fiscal 2023 comparable sales to decline about 13% against a 19.6% increase registered in the year-ago period. The current projection is significantly lower than what the company had projected last earnings. It had earlier guided second-quarter comparable sales to be roughly in line with an 8% decline witnessed in the first quarter.
Management estimates revenues to be approximately 7.5% higher than the pre-pandemic second-quarter fiscal 2020. The electronics retailer foresees non-GAAP operating income rate to be around 3.7%. Additionally, it expects inventory at the end of the second quarter to be roughly flat year over year.
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For fiscal 2023, Best Buy now expects comparable sales to decrease around 11% compared with its prior call of a 3-6% decline. It now anticipates non-GAAP operating income rate to be approximately 4%, down from the previously estimated range of 5.2% to 5.4%. This is due to deleverage in SG&A expense on account of lower sales forecast and gross margin pressure stemming from higher promotional activity in the consumer electronics industry.
In order to navigate the tough macro-economic conditions and mitigate the impact of a weak sales environment, Best Buy is likely to undertake cost-containment actions to manage profitability. It remains committed to a quarterly dividend of 88 cents a share but has halted share repurchases.
In the past three months, shares of this Zacks Rank #4 (Sell) company have fallen 17.2% compared with the industry’s decline of 14.4%.
The Zacks Consensus Estimate for Designer Brands’ current financial year revenues and EPS suggests growth of 6.9% and 16.5%, respectively, from the year-ago reported figure. DBI has a trailing four-quarter earnings surprise of 102.5%, on average.
G-III Apparel designs, sources and markets apparel and accessories under owned, licensed and private label brands. The stock currently flaunts a Zacks Rank #1.
The Zacks Consensus Estimate for G-III Apparel’s current financial year revenues and EPS suggests growth of 13.8% and 8.2%, respectively, from the year-ago reported figure. G-III Apparel has a trailing four-quarter earnings surprise of 97.5%, on average.
Capri Holdings, a global fashion luxury group consisting of iconic brands Versace, Jimmy Choo and Michael Kors, carries a Zacks Rank #2 (Buy). CPRI has an expected EPS growth rate of 11.3% for three-five years.
The Zacks Consensus Estimate for Capri Holdings’ current financial year sales and EPS suggests growth of 3% and 9.8%, respectively, from the year-ago period.
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Here's Why Best Buy (BBY) Trims Comparable Sales Forecast
A challenging operating environment and softness in consumer demand are making things tough for Best Buy Co., Inc. (BBY - Free Report) . Higher gasoline and food prices are squeezing disposable income, and consumers are compelled to curtail spending on discretionary items such as electronics. Despite undertaking concerted efforts to tide over the unwarranted situation, these factors persuaded management to trim comparable sales and operating margin rate forecast.
Corie Barry, Best Buy CEO, said, “As high inflation has continued and consumer sentiment has deteriorated, customer demand within the consumer electronics industry has softened even further, leading to Q2 financial results below the expectations we shared in May.”
Best Buy now envisions second-quarter fiscal 2023 comparable sales to decline about 13% against a 19.6% increase registered in the year-ago period. The current projection is significantly lower than what the company had projected last earnings. It had earlier guided second-quarter comparable sales to be roughly in line with an 8% decline witnessed in the first quarter.
Management estimates revenues to be approximately 7.5% higher than the pre-pandemic second-quarter fiscal 2020. The electronics retailer foresees non-GAAP operating income rate to be around 3.7%. Additionally, it expects inventory at the end of the second quarter to be roughly flat year over year.
Image Source: Zacks Investment Research
For fiscal 2023, Best Buy now expects comparable sales to decrease around 11% compared with its prior call of a 3-6% decline. It now anticipates non-GAAP operating income rate to be approximately 4%, down from the previously estimated range of 5.2% to 5.4%. This is due to deleverage in SG&A expense on account of lower sales forecast and gross margin pressure stemming from higher promotional activity in the consumer electronics industry.
In order to navigate the tough macro-economic conditions and mitigate the impact of a weak sales environment, Best Buy is likely to undertake cost-containment actions to manage profitability. It remains committed to a quarterly dividend of 88 cents a share but has halted share repurchases.
In the past three months, shares of this Zacks Rank #4 (Sell) company have fallen 17.2% compared with the industry’s decline of 14.4%.
3 Solid Picks
Here we have highlighted three better-ranked stocks, namely, Designer Brands (DBI - Free Report) , G-III Apparel (GIII - Free Report) and Capri Holdings (CPRI - Free Report) .
Designer Brands designs, manufactures and retails footwear and accessories. The stock currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Designer Brands’ current financial year revenues and EPS suggests growth of 6.9% and 16.5%, respectively, from the year-ago reported figure. DBI has a trailing four-quarter earnings surprise of 102.5%, on average.
G-III Apparel designs, sources and markets apparel and accessories under owned, licensed and private label brands. The stock currently flaunts a Zacks Rank #1.
The Zacks Consensus Estimate for G-III Apparel’s current financial year revenues and EPS suggests growth of 13.8% and 8.2%, respectively, from the year-ago reported figure. G-III Apparel has a trailing four-quarter earnings surprise of 97.5%, on average.
Capri Holdings, a global fashion luxury group consisting of iconic brands Versace, Jimmy Choo and Michael Kors, carries a Zacks Rank #2 (Buy). CPRI has an expected EPS growth rate of 11.3% for three-five years.
The Zacks Consensus Estimate for Capri Holdings’ current financial year sales and EPS suggests growth of 3% and 9.8%, respectively, from the year-ago period.